Institute for Public Finance Reform

Autonomous Non-Commercial Organization

Volume 14: Fiscal Decentralisation in Transition Countries

This volume represents a set of articles of Russian and foreign experts in the field of public finance management.
The articles consider international experience in solving typical problems of fiscal decentralization e.g.: expenditures and revenues assignment, intergovernmental grants and equalization, new financial principles introduction and non-governmental organizations involving into the budget process.

Authors of the articles were students of the Summer University Training Course on Intergovernmental
Fiscal Relations and Local Financial Management organized by the Central
European University (CEU) in Budapest, Hungary (2000-2006).

ISSN 1991-05-09

Contents

The article describes the chronology of reform of interbudget relations, creation of the main funds of financial support of regions through which the interbudget transfers are made, analyzes the prospects of their existence and interaction. Expediency of performance- based budgeting principles is proved by creation of municipal finance reform funds on regional level. That testifies to necessity of development of current procedures and improvement of interbudget relations directed to stimulation of reforms in the regions of Russian Federation and in the municipalities.

Erny MurniasihIs the new intergovernmental equalisation grant in Indonesia equalizing?Annotation

This paper finds that the new general-purpose grant allocation in Indonesia reduces significantly horizontal imbalance in the case of municipalities but hardly in provinces. A his« Obshchestvennye Finansy» (Public 152 Finance) Series 2007. Volume 2 (14) torical large discrepancy in revenues makes the job for this grant to achieve horizontal balance much tougher. The most recent regulation on revenue sharing mechanism might be the cause of increase of dispersion on revenue per capita. Political considerations are mostly advocated as the reason for such practice. The revision in the revenue sharing mechanism must have contained negotiations among rich-natural resources regions, politicians, and government. The intention to remove the hold-harmless provision by 2008 is very courageous and promising towards horizontal balance, if such clause will be implemented.

Lucie SedmihradskaMunicipal finance and budgeting in the Czech RepublicAnnotation

The paper concerns municipalities of Czech Republic, their structure and competencies, analyzes the municipal revenues, the budgetary process and its regulation, and evaluates the use of new budgeting tools. Municipalities in the Czech Republic are independent, selfgoverning entities whose powers and responsibilities are granted by laws of the national parliament. Municipal budgetary process is regulated only to some extent. The central regulation leaves significant space for municipalities to choose how they will proceed preparation and debate of the draft budget. Central government legislation requires that the municipalities prepare the multi-annual budget outlook. But lack of the support and methodological information substantially limits the potential this tool has.

Tajikistan is country in transition from centrally planned to market economy. Since 1991, after Tajikistan became independent state, economic and political reforms took place. What kind of measures undertook to improve public service providing? Does decentralisation process used as a tool for public services efficient and effectiveness improving? What is current situation with assignment of responsibilities and how sufficiently they supplied with funding sources? We will try to find answers on these questions in our research of intergovernmental fiscal relationships in Tajikistan. In kind of etalon we will use European Charter of local self-government and theoretical rules for expenditure and revenue delineation among different levels of government. However, blind following to theoretical rules and principles without considering of current specific conditions very rare lead to good results. So we tried to take into account all Tajikistan circumstances and make realistic conclusions in our evaluation, using results of ADB, WB and IMF studies.

Cristina ChiriacAutonomy of Local Governments in Moldova: A Financial PerspectiveAnnotation

The paper concerns municipalities of Czech Republic, their structure and competencies, analyzes the municipal revenues, the budgetary process and its regulation, and evaluates the use of new budgeting tools. Municipalities in the Czech Republic are independent, self-governing entities whose powers and responsibilities are granted by laws of the national parliament. Municipal budgetary process is regulated only to some extent. The central regulation leaves significant space for municipalities to choose how they will proceed Contents 153 preparation and debate of the draft budget. Central government legislation requires that the municipalities prepare the multi-annual budget outlook. But lack of the support and methodological information substantially limits the potential this tool has.

Nadezhda Babko
Budget Reform and Education System in Russia: Implementation of Per Capita Financing PrinciplesAnnotation

The article examines important issue of implementation of new system of financing educational institutions on the capitation basis and the goals, results and problems of this new system. The formula of calculation of municipal subvention, its supposed simplicity and usage difficulties in the regions of Russian Federation are discussed also. The authors point out the necessity of changes directed to implementation of capitation funding of general secondary education both at the stage of calculation of subvention from regional budget to local one and at the stage of distribution of received subvention funds between educational institutions inside municipality. In spite of the fact that best practice on that issue isn’t developed at the federal level yet the principles of budget reform contributed to transparency of interbudget system and in particular of subventions for educational process.

Yuliana Chavdarova GalabinovaBulgarian subnational authorities in the process of decentralization of the governmentAnnotation

As Bulgaria is preparing to join the European Union, the attention is focused on the close link between decentralization, regional administration and regional development. In the process of the decentralization in Bulgaria roles of the regions and regional administrations were traditionally belittled. Current conditions require continuation of the decentralization process and strengthening the role and the capacity of subnational authorities for successful participation in EU programs and funds. This article discusses regional selfgovernment issues in Bulgaria and challenges regarding the roles and relationships of the different levels of government in the process of decentralization.

This article gives an overview of revenue assignment and revenue sources of local governments in Sierra Leone including intergovernmental transfers to municipalities. Effort to increase mobilization of local government revenue must be directed towards the more important revenue sources. The indications of the importance and performance of each of the sources of municipality own revenues are discussed also. Considering the facts that the sustainability of service delivery is hinged on own revenue mobilization, the untimely disbursement of central government transfers and the expected discontinuity in the disbursements of donor funds in the medium to long term, local governments are faced with enormous challenges to enhance their revenue potential to improve service delivery at the local level. The methods of maximization of revenue collection are suggested in the article.

Elena Fedorova
Regional experience and perspectives of providing of public services by non-governmental organizations in RussiaAnnotation

This article examines one of the guidelines of the budget reform – transformation of state (municipal) institutions into organizations with other legal form. The budget institutions have limited ways of providing public services and it leads to persistent growth of cost of public services. Involving organizations with different legal forms in providing of such services financed from the budget and transition to new principles of their providing should increase quality of public services. Moreover, the transition of budget institutions into nongovernmental form is considered as best practice in regional and municipal finance management according to requirements of Ministry of Finance of Russian Federation. The problems of development and implementation of standards of public services by executive power bodies and the regional experience of budget sector restructuring are discussed also.